Industry Alignment

Industry Alignment

Industry Alignment is the framework for our industry to prioritise and then work together to address the important challenges and opportunities in front of us. Its aim is to bring the industry together to maximise value, from orchard through to market, and to ensure growers can take part in an ongoing, transparent conversation on how we do that.

Key themes

Improved Financials

Improved financials

Strengthening returns across all varieties, but particularly for Green growers and reducing fruit waste so we maximise the amount of fruit we sell. 

Improved Financials

Improved incentives

Aligning commercial incentives to our growing environment and customer expectations.

Improved Financials

Future issues management

How we respond to the expansion of unauthorised Gold3 plantings in China, protect industry workers from exploitation, respond to climate change, and ensure offshore production supports our domestic industry too.

Improved Financials

Greater ownership

Lifting grower shareholding of Zespri and increasing the number of growers owning a licensed variety.

Improved Financials

Enhanced supply chain transparency

Including better reporting, industry decision making, more clarity and flexibility in supply agreements, and a clear strategy for supply chain infrastructure development.

Industry decision making

One of the key workstreams within the Industry Alignment framework is industry decision-making. This reflects feedback we’ve heard from many growers who want to better understand how decisions are made about industry policy, and consider whether this needs to be reviewed. 

The Industry Advisory Council (IAC) is a pan-industry body consisting of representatives from Zespri, NZKGI, and registered suppliers. It is set up to consider significant pan-industry issues. Its scope is to consider strategic industry policy, governance, and structure.

Who are the members?

  1. Five Zespri representatives
  2. Five NZKGI representatives
  3. Five registered supplier representatives

Each one of these groups is called an “electoral college”.

How does the voting process work?

Each IAC member has one vote. Voting is conducted in three electoral voting colleges representing each membership group. For a vote to be passed, a majority of the members in each electoral college must vote in favour of it. That means, of the five representatives in each college, at least three must vote in favour of a recommendation, regardless of the size of that supplier. 

The Industry Supply Group (ISG) considers any matters relating to insurance (marine cargo, hail, bailees, contamination), supplier accountability, infringement and penalty charges, pooling processes and rules, and pricing and payments as part of its operational planning within the supply chain.

The ISG also negotiates the terms of the industry Supply Agreement and reviews and determines payments such as KiwiStart Rates, Time Rates, Labels, Service Payments, Controlled Atmosphere Compensation, Pack Differential Rates, and DIFOTIS. It also reviews key industry documents like the Quality Manual, Packaging Specifications, Crop Protection, Maturity Standards, and the EDI Manual.

Who are the members?

  1. Five Zespri representatives
  2. Thirteen Registered Supplier representatives (1 from each)
  3. Three NZKGI grower-appointed representatives

How does the voting process work?

The majority of decisions are made by consensus between the three parties, however if general consensus cannot be reached then a recommendation needs to be supported by both Zespri and Registered Suppliers representing 70% of the industry’s trays. Even though the voting threshold is 70%, if a single supplier represents 30% of the industry’s trays, they are not able to veto recommendations supported by all other suppliers.

Shareholder Alignment

Following support from the Industry Advisory Council (IAC), Zespri is proceeding with two initiatives designed to strengthen its grower shareholding.

These include offering growers the opportunity from 2025:

  1. To receive their June loyalty payment (relating to the 2024 harvest season) as shares
  2. Shareholders to have the ability to reinvest dividend payments as shares.

Both of these initiatives will be provided on an opt-in basis, with the January loyalty payment remaining a cash payment. The initiatives reflect a strong desire from the industry to make share trading easier as we look to get greater grower shareholder alignment and lift the number of growers who are Zespri shareholders.

Growers have highlighted that there is a strong desire to avoid having to make a significant upfront outlay of cash in buying shares. The two options we’ve announced reflect that feedback and are designed to make beginning or increasing Zespri shareholdings easier for growers. Purchasing shares directly from Zespri will also avoid brokerage fees, and does not require additional anti-money laundering compliance checks.

Discussion at the IAC covered the changes in the cashflow direction associated with these initiatives.

Under the revised structure, Zespri will pay loyalty direct to growers, an adjustment from the traditional approach of this payment being pooled and then paid by Supply Entities. The change will not be initiated until the January 2025 loyalty payment is made. The IAC approved the changes required to the 2024 Loyalty Agreement to support our ability to provide loyalty payments as shares.

We intend to issue new shares for the loyalty-as-shares and dividend-as-shares initiatives taking place in 2025.

While our plans are still being finalised, Zespri is considering using the capital raised from these share issues to conduct a subsequent share buy-back offer following the 2025 loyalty and dividend share issue. The acquired shares could be cancelled or held as Treasury Stock to be re-issued within 12 months of being acquired. Before any potential future buyback, Zespri needs a binding ruling from the IRD to ensure that any proceeds paid to eligible selling shareholders are taxfree. Until this ruling has been made, a future buy back cannot be confirmed.

We’re currently working through the implementation plan to support these initiatives. There is nothing for you to do at this stage and you cannot currently apply for the initiatives.

When the initiatives do proceed, the offers to participate will be made in accordance with the Financial Markets Conduct Act and details regarding the initiatives, including application dates, eligible participants and applicable terms and conditions will be released and clearly communicated to the industry closer to the time. There will be further Shares 101 sessions held over the course of the year. Keep a look out on Canopy and in future Kiwifliers if you would be interested in attending one.

Grower research

We regularly release surveys for growers through the independent research agency Primary Purpose. Beyond our day-to-day engagement with growers, these survey's are an important way for us to get a better sense of what’s on growers’ minds, and to hear from more growers, including the various perspectives on what the big issues are we’re facing as an industry, how we can address these and what we can do better at Zespri.

Our most recent round of research at the start of the year indicated there’s growing optimism within the industry following a challenging couple of seasons.

A total of 71% of growers told us they’re confident in the future of the industry, up from 64% in November. A total of 6% were not confident, and we need to ensure we focus on delivering high-quality fruit, managing costs and returning as much value as we can from the markets to support all growers.

This is a reflection of both the challenges of previous years and the more positive outlook this year and partly due to some of the changes that we’ve made at our end in response to your feedback.

We’ve had positive feedback on the creation of our shed talks, the changes in the licence release system, and our focus on increasing grower shareholding in Zespri and lifting Green OGRs. While we are pleased with the improvement in sentiment, we know there is still work to be done, so it is really important that growers continue to participate in these short surveys so we can track our progress and make changes where needed.

We’ve also heard that there’s a real desire for us to look at how we can provide better assistance in helping growers with compliance requirements – particularly around the provision of improved online tools to assist with GLOBALG.A.P.  We’re already underway on assessing what we can do in this space and you can expect to hear more on this in the coming months.

China Unauthorised G3 Plantings

Zespri continues to monitor the estimated scale of plantings of unauthorised Gold3 in China, including assessing the extent of these plantings following the latest grafting window.

The most recent assessment, which is only preliminary at this stage, indicates there are currently approximately 8,400 of unauthorised Gold3 plantings. This is up from our previous estimate of approximately 7,800 hectares. While plantings have increased, the expansion rate appears to continue to be slowing, including in the Sichuan region where the majority of unauthorised plantings are.

Zespri continues its legal action against unauthorised producers and distributors of Gold3, including the civil case in the Intellectual Property Court in Nanjing, China.

Chinese authorities have executed a series of operations targeting the fraudulent use of Zespri’s IP.

Since March, we've have been working with the Shanghai Public Security Bureau (Police) to take enforcement action against a small number of people involved in extensive counterfeit operations. Information gathered through Zespri’s investigations allowed the local police to successfully conduct a number of raids against those sellers. During these raids, it was discovered that the counterfeiting operation also affected fellow fruit marketer Dole and Zespri customer GoodFarmer, which have since joined our enforcement action. The Public Prosecutor’s Office has confirmed it will be prosecuting these crimes, with the enforcement action already having a significant deterrent effect on counterfeit sales on the e-commerce platform.

The work reflects our strategy of taking targeted action to keep unauthorised fruit or counterfeit branding out of our key channels to help defend our premium brand, to deter counterfeit activity, and ensure food safety for our consumers. It also reflects the commitment from local authorities to enforce IP rights. The work in this space is increasingly important with similar cases of counterfeit expected to rise as the availability of locally grown unauthorised G3 increases in future years.

Zespri has also filed further legal action to recover damages from those involved in the propagation of Gold3 plantings as part of our commitment to protecting the industry’s investment and intellectual property rights.

Zespri has filed a petition in a Chinese court to recognise and enforce the judgement of the New Zealand Court of Appeal against those found to have taken the original budwood out of New Zealand to China. This is in order to recover remaining damages from the $12 million awarded to Zespri after Haoyu Gao and his associates were found guilty of fraudulently offering to license Zespri varieties to parties in China and facilitated the planting of these varieties on Chinese orchards.

Our civil litigation case in the Intellectual Property Court in Nanjing against two defendants linked to the unauthorised production, sale, and marketing of illegally grown G3 is also continuing. We have been encouraged by the recent success of T&G’s plant variety rights infringement civil case in China, related to the illegal growing of its Envy apple variety. T&G was awarded its full claim for damages in the case, with the case demonstrating the increased protection for PVRs made possible by changes to China’s Seed Law in 2022. Late last year, T&G celebrated the first sales of its locally grown Envy Apples in China, following an agreement reached in 2018 that granted Joy Wing Mau a licence to grow and sell managed volumes of Envy apples to the local China market.

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